Catch problems early in a lower cost setting! Not so simple, explain Harvard researchers who found 58% of retail clinic visits did not replace physician appointments, increasing costs.

Have employers found any health care gold at the end of a rainbow? Little, according to Northwestern University researchers in a recent American Journal of Accountable Care article. “Efforts to date have produced few promising strategies,” they concluded.

Does that mean employers should stop chasing rainbows? On the contrary! We need more employers chasing more rainbows. New rainbows. “No one really knows what will or won’t work. And we won’t know until we try some things,” urges Wal-Mart’s benefits leader, Sally Welborn.

More important than chasing rainbows, employers must become better health care buyers. Leveraging nearly $650 billion in annual spending, employers need to negotiate harder for better deals, form alliances to master the supply chain, work locally for greater value, align with government payment reforms wherever possible and contract directly with innovative providers.

Employers Negotiating Better

Given the money they spend on health care and their negotiating prowess as business people, employers should get better health care deals, especially on expensive drugs. They’re not, says Dr. Robert Galvin, formerly of General Electric and now CEO of Equity Healthcare.

“Baffling” is how he describes what he calls employers’ “weak-kneed behavior”. “No other group has a greater stake in buying smarter. But employers have always been reluctant actors in the health care system, as they feel out of their depth,” he explains.

Most employers are not in the health care business. Still, Galvin wants them to bargain more effectively with pharmacy benefit management (PBM) firms and health insurers. These expert intermediaries, he cautions, do not fully align their interests with those of their employer clients. At Equity Healthcare, Galvin negotiates for private-equity-owned employers like Toys R Us, Sea World, La Quinta and J.Crew.

Employers Forming Alliances

Large employers have been at the forefront of attempting to change health care. Still, even the pioneers and expert buyers among them are dissatisfied with their progress. Twenty of them have formed the Health Transformation Alliance, including value based insurance design pioneer Pitney Bowes and Caterpillar, which maintains its own prescription drug formulary.

“We’ve done what we can as individual companies. By joining together, we can do more,” said Marc Reed chief administrative officer of Verizon. The Alliance will serve as part of each company’s health strategy, fostering increased innovation, better data analyses and greater leverage to make the “current multilayered supply chain more efficient.” Their first project, slated for 2017: More affordable prescription medications.

Despite the involvement of companies like Pitney Bowes, Caterpillar, Verizon and other blue chip employers, some observers have given the Alliance a ho hum reception. Noting the already “crowded field” of business health groups, Forbes health correspondent Bruce Japsen observed, “it is just one of a number of similar, overlapping efforts that have so far failed to keep the rate of employer medical cost increases even on par with general inflation.”

Employers Working Locally

Prominent among other efforts are regional business health coalitions, represented nationally by the National Business Coalition on Health (NBCH). Board chair, Karen van Caulil, who also serves as CEO of the Florida Health Care Coalition, responded to the Alliance announcement with a suggestion.

“Our coalitions have been doing this work for years in their respective markets and have the regional intelligence and boots on the ground to make a difference. Many of the companies engaged in this new alliance are not involved in the regional coalitions and we would welcome them to play a more active role to bring about change in the communities where their employees live and work.”

The St. Louis Business Health Coalition also is the key driver of the Midwest Health Initiative (MHI), a broad-based, collaboration involving providers, payers, citizen groups, labor unions and employers. MHI stewards a data asset on regional on disease prevalence, care quality, and treatment patterns

Employers Aligning Nationally

On a national level, incoming NBCH CEO Michael Thompson believes “longer term reform, frankly, is going to come from the private sector aligning with the public sector,” which must take the lead. There is, he says, “a dire need for public programs like Medicare and Medicaid to get control of the situation.” Business should work at the local level, supporting engagement and driving change in their communities.

Such alignment could ensure health care purchasers – government and private – send clear and consistent signals to providers. However, it only makes sense with well-designed, proven payment models suitable for private sector application.

However, few employers currently are engaged in the Health Care Payment Learning and Action Network (HCP-LAN) established by CMS for public-private collaboration on value based payment initiatives. Pleading with employers to get involved, Wal-Mart’s Welborn says, “We need to be at the table with our best guess about what might work and then be willing to take a gamble, pilot a few ideas, and share outcomes.”

“We are highly encouraged by the willingness of our health system partners to engage with us and make investments that will support the changes needed to better deliver care, says Jeff White, Boeing’s director of health care strategy and policy.

Employees still have a choice between a Preferred Partnership and a more traditional plan. However, to encourage participation in the former, Boeing provides employees with incentives such as free primary care visits, lower employee paycheck contributions and higher company contributions to health savings accounts.

Participation has reached 35 percent in the Seattle area, where Boeing first launched the program, and ranges between 15 and 30 percent in the remaining markets. According to White, employee satisfaction is high, averaging 8.5 out of 10.

Intel, another, large, direct-contracting employer, “believes it is time for employers to work more directly to transform the payment and delivery systems for healthcare.” It has engaged directly and deeply in benefit design and delivery with Presbyterian Healthcare Services for its New Mexico employees.

Other large employers, like Lowes, Wal-Mart and McKesson, are participating in an Employer Centers of Excellence initiative through the Pacific Business Group on Health (PBGH) . They send employees directly to nationally recognized institutions like Johns Hopkins and Cleveland Clinic for orthopedic surgery and cardiac care.

Employers need not be large to contract directly – and successfully – with health systems, as employers of all sizes have found in Springfield, MO. There, the city government, local utilities, the public schools and Bass Pro Shops have deals with Mercy Springfield, which has been direct contracting with employers for 20 years. In fact, Mercy’s direct to employer business is its largest contract group.

Four years ago, Mercy began to accept limited risk. “We will give you basically a target and guarantee you less [cost] than where you’d expect to be in the next year,” David Cane, Mercy’s regional vice president of payer relations and contracting, explained to John Morrissey of Health Progress. “And if we don’t reach that, then at the end of the year, we’ll just write you a check for the difference, up to where the target was.” Morrissey reports that Mercy has yet to write a check.

Mercy apparently has a knack for working directly with employers. The Springfield hospital is one of the select few participating in the PBGH Centers of Excellence initiative. Meanwhile, the Mercy system in St. Louis, of which Mercy Springfield is a part, is Boeing’s direct contracting partner in St. Louis.

Perhaps the best way for an employer to become a better buyer is to collaborate with a better provider and together chase rainbows.

Amgen’s Repatha is “well tolerated” and a “welcome alternative” for some, admits the U.K.’s National Institute for Health and Care Excellence (NICE). Yet, the British cost watchdog this week told Britain’s National Health Service (NHS) not to pay for the new super cholesterol reducer.

Repatha, one of the new class of biologic specialty drugs called PCSK9 inhibitors, reduces ‘bad’ low-density lipoprotein (LDL) cholesterol by 54 to 77%. The European Commission and the U.S. Food and Drug Administration (FDA) approved Repatha and another PCSK9 drug, Praluent, this summer.

More Repatha Data

In a draft guidance set for final review in January, NICE disagreed with some of Amgen’s economic calculations and assumptions. More significantly, it said direct evidence of Repatha’s impact on cardiovascular disease (CVD) outcomes was lacking and thus an “important limitation” and “key area of uncertainty.”

NICE could have used Repatha’s cholesterol-reducing results as a surrogate for CVD outcomes, based on biologic and epidemiologic studies of statins’ cholesterol-lowering impact on these outcomes. In fact, the draft guidance allowed, “it was reasonable to infer that evolocumab (Repatha) would reduce CVD.”

However, NICE instead proposed a guidance review for February 2018, when results will be available from the long term, FOURNIER study documenting Repatha’s impact on CVD outcomes. Short-term- study meta-analyses suggest considerable Repatha CVD effectiveness, possibly reducing mortality odds by 50%.

Pay for Performance

Meanwhile, a week earlier, back in the U.S., Harvard Pilgrim Health Plan decided not to wait for documented CVD outcomes. In an exclusive agreement with Amgen, the plan negotiated a discount on the drug’s annual $14,100 wholesale price, plus additional discounts if Repatha delivers LDL reductions less than those observed during clinical trials.

Further discounts accrue if utilization exceeds certain limits, incenting Amgen to focus on patients who have an inherited disorder resulting in high levels of LDL cholesterol or have high-risk atherosclerotic cardiovascular disease conditions, such as heart attack or stroke, that have been resistant to treatment.

Harvard Pilgrim’s chief medical officer, Michael Sherman, told the Boston Globe that slightly less than one percent of the plan’s 1.2 million members would be eligible for Repatha. He added that it was likely that even fewer would opt for the drug because it comes as a once or twice monthly injectable rather than a once daily pill. The plan will also deploy rigorous utilization controls.

“We’re not anywhere near that,” Sherman told Jon Gardner of EP Vantage. “Ultimately, it was more about a negotiation, versus fundamentally agreeing that there’s a dollar value to [a QALY], which is where I’d like to be. Maybe when there are other drugs on the market and more competition, we may get there.”

Express Scripts’ Deals

Mum, too, about exact pricing has been Express Scripts, which placed both Praluent and Repatha on its National Preferred Formulary in October after securing discounts from Amgen and the makers of Praluent, Sanofi and Regeneron.

This was after a July declaration by Express Scripts President Tim Wentworth, “while these drugs are being viewed as breakthroughs, they also have the potential to wreak financial havoc on clients who do not proactively manage.”

At Express Scripts, utilization management will come through a new Cholesterol Care Value program featuring “rigorous documentation” to ensure use only by clinically appropriate patients, who will get help with properly injecting the drugs and remaining adherent.

For plan sponsors enrolled in the CCV program, Express Scripts will cap total 2016 costs for the drugs. It expects to spend $750 million on the drugs next year, lower than previous forecasts. Among those earlier predictions was a ‘sky is falling’ alarm from CVS, which said costs could reach $150 billion annually if all coronary disease patients were included.

Before Express Scripts struck its PCSK9 deals, the company’s chief medical officer, Steve Miller, said the company would reference the ICER findings in its “negotiations with manufacturers.” Apparently pleased with the result, Miller said the company received the best price possible and complimented the manufacturers for “collaborative discussions.”

During negotiations, Amgen, Sanofi, and Regeneron presumably repeated for Express Scripts their critique of the ICER methodology, specifically that it underestimated CVD risk, was not applicable to the population most likely to receive PCSK9’s and overestimated the population size likely to be treated with PCSK9’s.

Value Controversies

Amgen also explained that an alternative cost effectiveness model, which it is developing in alignment with the NICE model, confirms PCSK9 as cost effective at a QALY threshold of $150,000 or below. In other words, Amgen believes the ICER ‘care value price’ of $7,735 (see above) should more accurately be $14,100. The company notes that $150,000 is the value threshold recommended by the American College of Cardiology and the American Heart Association.

Meanwhile, back in the U.K., differential pricing is in play where the Repatha list price is £4,448.60 ($6,802.13), excluding an undisclosed patient access scheme discount. Including the discount, the price Amgen proposed to NICE resulted in value thresholds ranging from a high of £78,879 ($119,903) to a most cost effective low of £22,902 ($34,813), depending on patient subpopulation and indication.

In stark contrast to the U.S., the QALY threshold over which NICE is less likely to recommend treatments for use in the NHS is typically between £20,000 ($30,393) and £30,000 ($45,590). For the potential Repatha patients where the QALY threshold was within this range, NICE still decided to wait two years for more studies, the results of which are highly likely to show a CVD benefit.

Perhaps there is another reason for caution at NICE. It is coming under pressure to lower the threshold to £13,000 ($19,759) – very different from the increasingly standard $150,000 in the U.S. University of York’s Prof. Karl Claxton says that the current NICE threshold diverts funds from local health authorities and medical procedures, which he claims are more cost effective than new, expensive drugs.

Value or Values

“Concentrating only on QALYs means we are in danger of losing sight of other things that people, health systems and the government value very highly. This includes encouraging an innovative UK research base, or perhaps valuing more highly specific treatments that may be the only option for people with certain conditions,” Dillon added.

To advance Sir Andrew’s point, what is being valued depends on our values. On that score, the negotiators at Amgen, Sanofi, Regeneron, Express Scripts and Harvard Pilgrim appear to have struck the right balance.

They are ensuring that the patients clinically most in need of Repatha and Praluent get the drugs by focusing on just those patients, while also providing financial support to those who might not otherwise get the drugs because of economic need.2

In human terms, only 28 people would need to be treated over five years to prevent a heart attack, stroke or death. A “relatively low” number ICER admitted in its report. Viewed another way by ICER, among CVD patients with high cholesterol, taking a statin and a PCSK9 together would prevent 5,621,800 heart attacks, strokes or deaths over a lifetime horizon.

Meanwhile, the U.K. waits.

____________________________________________

When ICER initially announced its findings in early September, it highlighted and got the most headlines for an even lower, “value based price benchmark” of $2,177. The key constraining assumption: That health care costs should not grow any faster than growth in the overall national economy, which it estimated at +1% GDP growth. After a series of calculations and further assumptions, ICER declared that the total annual cost of any single new drug could not exceed $904 million. In other words, rationing. ↩

Groups such as AARP and editorial writers call for more public transparency in pricing agreements between payers like Express Scripts and manufacturers like Amgen. However, the confidentiality to which buyers and sellers agree helps sustain a sort of differential pricing and access system within the U.S., i.e. ensuring the patients in clinical and financial need get the drugs they need. Express Scripts negotiating with a manufacturer surely is a fair match. However, where the match is not fair, i.e. when the buyer is a consumer, such as a consumer with a high deductible, then transparency is needed along with financial assistance. ↩